Leading Australian economists and commentators, Justin Fabo from ANZ and Rob Henderson from NAB, share their views on the economic outlook for 2014 and beyond. JPAbusiness managing director James Price then discusses the implications of these forecasts for small- to medium-sized enterprises.

1. 2014 Business Forecast
What to watch out for in the year ahead
Contributors:
Justin Fabo, ANZ
Rob Henderson, NAB
James Price, JPAbusiness

2. Table
of
Contents
Introduction
...........................................................................................................
3
Chapter
1:
What
is
the
outlook
for
the
Australian
economy
in
2014?
.....................
4
ANZ’s
key
forecasts
for
2014
........................................................................................................................
4
Downside
risks
for
the
Economy
and
SMEs
in
2014
..........................................................................
9
Opportunities
and
upside
risks
for
the
Economy
and
SMEs
in
2014
........................................
10
Overview
of
the
Australian
economy
in
2014
.....................................................................................
11
Chapter
2:
What
is
the
outlook
for
the
international
economy
in
2014?
...............
12
NAB’s
key
forecasts
for
2014
......................................................................................................................
12
What
are
the
opportunities
for
Australia?
............................................................................................
18
What
are
the
risks
for
Australia?
..............................................................................................................
18
International
outlook
in
2014
and
its
implications
for
Australia
...............................................
19
Chapter
3:
What
do
the
forecasts
mean
for
your
business?
..................................
20
Key
messages
for
small-­‐
to
medium-­‐sized
businesses
....................................................................
21
Australia’s
changing
business
landscape
..............................................................................................
23
5
key
features
of
the
new
business
landscape
....................................................................................
24
How
to
navigate
the
new
business
landscape
.....................................................................................
27
Holiday
activities!
............................................................................................................................................
28
Disclaimer: The information contained in this eBook is general in nature
and should not be taken as personal, professional advice.
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3. Introduction
What is the outlook for the Australian and international economies in 2014
and what are the implications for your business?
To answer these questions we’ve asked leading Australian economists
and commentators, Justin Fabo from ANZ and Rob Henderson from
NAB, to share their views on the economic outlook for 2014 and beyond.
In Chapter 1 Justin answers our questions on the Australian economic outlook,
while Chapter 2 sees Rob explain NAB’s forecasts for the wider international
economy in 2014.
In our final chapter James discusses the implications of these forecasts for
small to medium-sized enterprises (SMEs).
Here’s a brief introduction to our guest contributors:
Justin Fabo is head of Australian Economics,
Corporate and Commercial within ANZ’s
Australian Economics team. Justin specialises in
macroeconomic forecasting and research, including
on the labour market. He provides key strategic
commentary on the Australian economy, including on
the corporate segment operating across the economy.
Rob Henderson is the Chief Economist, Markets,
at National Australia Bank. In this role, Rob advises
the bank’s dealing rooms and business clients on the
economy and financial markets. He is a
spokesperson for NAB on economic and financial
issues and makes regular contributions to TV, radio,
the print media and the news wires.
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4. Chapter 1: What is the outlook for the
Australian economy in 2014?
Comments by Justin Fabo
ANZ
ANZ’s key forecasts for 2014
•
•
•
•
•
•
•
•
Aussie dollar – US 87 cents by the end of 2014
Interest rates – 2.5% (RBA cash rate)
Business investment – fall of 4% (this includes mining and
non-mining, adjusted for inflation)
Business credit growth – around 5%
Overall household consumption – up 2.5%
Wages growth – below 3%
Employment growth – 1.5%
Inflation – 2.25-2.5%
What is your forecast for the AUD in 2014?
We’re looking at 87 US cents by the end of the year.
The currency doesn’t
look too over-valued
at the moment (below
US89c – midDecember 2013) and
is broadly in line with
its long-run drivers, i.e.
commodity prices,
interest rate
differentials, growth
differentials and so on.
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5. However we expect the US economy to pick up a bit, with overall growth of
around 3%, and we don’t expect the Australian economy to continue outperforming the US the way it has for the past few years.
As a result interest rate differentials will be a lot narrower and we expect
commodity prices to continue to gradually drift lower.
What is your forecast for Interest Rates in 2014?
We expect the RBA official cash rate to stay at 2.5% until at least early
2015.
The reason for this is we expect the economy to muddle along for a little while,
so we still need interest rates pretty low.
The RBA board probably doesn’t want to cut rates any further if they can get
away with it; they want the currency to do the work for them. They don’t want
to stoke the housing market too much, even though they’re not overly
concerned about it at the moment.
However there is a risk that around the middle of 2014 there will be
some uncertainty, as it’s about that time mining investment starts to
come off pretty quickly.
If the other parts of the economy aren’t picking up strongly enough it will be a
pretty tricky situation for policy makers.
It’s conceivable
we might need to
get rates down a
little bit more,
particularly if the
currency doesn’t
come off a fair bit,
but that’s not our
call at the
moment.
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6. What is your forecast for Business Investment in 2014?
Business investment is interesting because it’s pretty mixed.
Looking backwards we’ve had one of the biggest mining investment booms
the world has ever seen, and in a pretty short period of time as well.
However, mining investment has broadly topped out so it’s not really
contributing to growth anymore. It looks like it will stay around this historically
high level for another two or three quarters, but from mid-2014 it will come off
pretty sharply.
We’re very confident about that because a large share of the investment
happening now is in a handful of big gas projects and once they start to scale
back there is nothing of the same size that has started or is in the pipeline.
We’ll then need non-mining investment to pick up and all signs are it’s
going to be pretty weak until at least mid-2014, and it’s more a hope
than a forecast that it will pick up after that.
We probably won’t see a strong pick-up in non-mining investment until we’re
into 2015 and beyond, because businesses are saying they have plenty of
spare capacity so some of that has to be eaten up before they invest.
Demand growth is nowhere near as strong as it was before the GFC and that
is expected to continue because people are being cautious.
Total business investment (includes mining and non-mining,
adjusted for inflation):
•
•
2013 – expecting fall of 2%
•
2014 – forecast fall of 4%
•
6
2011-12 – grew at 16-19 per cent each year
2015 – forecast fall of 7%
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7. What is your forecast for Business Credit in 2014?
Business credit growth has been pretty weak for a number of years now
but we’re expecting it to pick up in 2014 to around 5%.
This is because we do expect non-mining business investment growth to pick
up a little, but from a macro perspective it’s not enough to offset the weaker
mining investment.
What is your forecast for Overall Household Consumption
in 2014?
We don’t expect much improvement in household income growth because the
labour market is pretty soft, but one factor that should provide some support to
consumption is asset price rises, so there should be positive ‘wealth effects’.
We’ve also seen some improvement in consumer confidence over the past 18
months, however it’s still mixed for retail and going into 2014 will stay mixed.
The lower currency may also benefit some retailers. It means domestic
retailers become more competitive on price relative to the overseas online
seller. We’re already seeing that in some numbers on online retailing growth;
growth in overseas online retailing has slowed up a lot.
Further, over the period the currency has started coming down, growth in the
number of Australians going overseas has also slowed, and the amount
we’re spending overseas has flat-lined. That means the drag on spending
domestically has diminished.
For some retailers, however, the lower currency means the products they buy
are more expensive and if they can’t pass that on in margins, it hurts profits.
Overall Household Consumption Growth (adjusted for
inflation):
• 2012 – 2.5%
• 2013 – a bit below 2% (slowed this year in part due to slowing
in wages growth)
• 2014 – 2.5%
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8. What is your forecast for Wages in 2014?
It’s very rare for wages to go backwards, unless you’re in a place like Greece
or Ireland, but we have seen a very sharp slowing in wages growth in
Australia, which began in mid-2012.
Over that period the overall demand for labour has slowed up a lot and that
has spilled over into slower wages growth, plus businesses in general have
been looking to cut costs.
It’s well known that wages and other costs have gone up in Australia over a
long period of time because the economy has done well. The basic story is:
•
From 2003-2011 we had a massive run-up in the prices of our
commodity exports.
•
This led to a mining investment boom which led directly to upward
pressure on wages across the economy.
•
All the extra revenue in the economy boosted profits in general, which
meant businesses were able to keep on the marginal worker and pay
for healthy wages growth.
•
Extra revenue also boosted government revenues, which was recycled
back through tax cuts over several years.
But all this force that came out of the commodity price boom has now ended.
From the September quarter 2011 our commodity prices have come off
about 25% – though they’re still very high – and that free kick we were
getting to our income growth as a nation is no longer there and that’s
filtered through not just to mining profits, but to other businesses’
profits.
That then filters through to what businesses are able to pay their staff.
Combined with the higher currency, that is the reason wages growth has
slowed up a lot and we don’t see that changing for some time.
We think over the next year, at least, we’re looking at wages growth below
3%.
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9. What is your forecast for Employment in 2014?
Employment was pretty soft in 2013, particularly relative to the strong growth
we are experiencing in the population.
In 2014 it’s looking a little better, and we’re forecasting 1.5% growth
over the year. We see residential construction as one clear sector
where there will be employment growth.
If our forecast for the currency is correct, or if it comes off even more, there
will be parts of manufacturing that will be generating jobs, despite the recent
closures forecast into the future (e.g. car manufacturing and whitegoods).
What is your forecast for Inflation in 2014?
Inflation has gone off the radar globally and in Australia it’s just not an issue.
The RBA has their target band of 2-3% annual inflation and we think it’s
going to stay in the bottom half of that band in 2014, about 2.25-2.5%.
The key reason is wages growth remaining soft, productivity growth improving
and firms having plenty of spare capacity so there isn’t a lot of scope to
increase margins.
Downside risks for the Economy and SMEs in 2014
1. Mining investment – we know it’s going to come off pretty sharply
from around mid-2014. If it comes off harder than we’ve anticipated
and/or the flow-on effects are worse then it’s a clear risk for the
economy. One cushioning aspect will be that the currency should
adjust lower than we expect in that scenario. That’s not a given, though.
2. Global impacts – We’re a small, open economy, heavily influenced by
what happens overseas. (See Chapter 2 – International Economic
Outlook)
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10. Opportunities and upside risks for the Economy and
SMEs in 2014
1. Lots of SMEs in Australia have some exposure to housing market
activity and that has clearly been strengthening in terms of sales, plus
construction. We expect that to remain the case through 2014, with
construction activity strengthening.
2. Food has been one bright spot of retail trade in recent years.
Population growth has been pretty strong and we all need to eat, so
underlying demand for food has been chugging along. There’s also the
‘MasterChef effect’ theory, which has seen people spend money on
nice food, but cut back on other discretionary spending.
3. If the currency does move lower this will clearly create opportunities for
exporting industries and industries that compete with imports will
become more competitive. We are already seeing this.
4. One opportunity that is a bit more left field is that a large share of
businesses will be keeping a focus on their costs. When businesses do
that it throws up opportunities for small businesses that provide
services in the areas of advice, solutions and efficiencies.
5. Some parts of non-residential construction might also throw up
some opportunities. The outlook is getting a bit better there, though it
will be very patchy and dependent on your location.
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11. Overview of the Australian economy in 2014
Overall we think things are still going to be pretty tricky and a little sluggish at
least for the next 6-9 months and then we’ll see some signs of non-mining
sources of activity getting a bit of momentum.
However, if you’re a business it’s difficult to see how uncertainty around both
politics and the economy is going to diminish much over the next couple of
years. Hopefully it will.
Most businesses have come to terms with the fact that people’s
spending has changed. It’s pretty rare when we talk to businesses that
they think growth in profits and spending are going to return to the
strong pre-GFC growth rates. No one is really expecting that.
The risk is that people go too far the other way and think the global economy
is broken forever and no one invests anymore, because then it becomes selffulfilling. We’re nowhere near that, but we do need a bit more confidence out
there.
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12. Chapter 2: What is the outlook for the
international economy in 2014?
Comments by Rob Henderson
National Australia Bank
NAB’s key forecasts for 2014
China
•
•
•
Chinese outlook still very supportive of the Australian economy.
Chinese economic growth slowing, but economy so enormous that
even 7% growth represents massive increase in size of economy.
Rising opportunities for Australian enterprises of all sizes with links to
China’s economy.
Japan
•
•
Japan enjoying best growth numbers in two decades.
Good news for Australia as Japan is still Australia’s second largest
export destination after China.
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13. USA
•
•
•
•
•
Sustainable private sector recovery occurring in America.
The Federal Reserve has now started to reduce the extent of its
economic stimulation, which will eventually lead to higher US cash
rates.
Longer term interest rates are already significantly higher, anticipating
the Fed’s ‘tapering’ of its monthly stimulus program.
Higher US rates mean higher Australian interest rates.
Higher US interest rates will lead to higher US dollar, putting downward
pressure on the Aussie dollar.
European Union
•
•
EU will only affect Australia if it ‘falls over’.
European Central Bank and EU policy makers have greatly reduced
the risk of major financial meltdown in Europe.
What is the economic outlook for China in 2014?
China’s growth rate over the past 20 years has been about 9.25%, but it is
slowing down and we think in the next couple of years it’s going to grow in the
range of 7 to 7.5%.
It does sound like quite a big slowdown, but the truth is China’s economy is so
much larger today than it was 20 years ago, that even growing at 7% still
represents a massive increase in the size of their economy each year.
For example, on our figures, the Chinese economy will expand by $3.6
trillion yuan in 2014. It will need a lot of coal, iron ore and other natural
resources to enable that expansion to go ahead and that means a big
increase in exports from Australia.
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14. What opportunities are there for Australian SMEs in
China in 2014?
There are rising opportunities for enterprises of all sizes in Australia that are in
some way linked to China’s economy.
The obvious ones are for the large exporters of iron ore, coal and LNG, which
are normally large multi-national corporations.
However you can also include service providers like the tourism sector.
China has the largest number of outbound tourists of any country in the
world today and Chinese short-term visitors to Australia outnumber
short-term visitors from anywhere else except New Zealand.
So the growth of middle class incomes in China represents a massive
opportunity for lots of small and medium-sized tourist operations.
There are similar opportunities for all sorts of firms providing professional
services in the education and health areas, as well as business services,
accountants, lawyers, designers and IT people.
Source: National Australia Bank
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15. And in the future…?
China’s economy has been growing very rapidly for about a decade and this
increase has meant a lot of their available supplies of resources like coal, iron
ore and LNG have been consumed.
I think in the next five years or so our key exports will remain energy and
resources, but fast forward 20 years down the track and we’ll be exporting far
more services to China than any other type of product.
That’s good news for Australia because already almost three-quarters
of Australians are employed in the services sector.
That’s where the bulk of employment is, that’s where the bulk of our
skills lie, and that’s where the opportunities lie because as Chinese and
other Asian countries’ populations enjoy rising living standards, they’ll demand
more services in health, education, tourism, you name it.
That will be a real bonanza for Australians in the years ahead.
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16. What is the economic outlook for Japan in 2014?
Japan is having the best couple of years we’ve seen for two decades, and
that seems to be a product of the policies introduced by Prime Minister Abe.
His government’s policies have been instrumental in changing the central
bank’s modus operandi to try and make it much more proactive in terms of
stimulating their economy. They’ve massively increased their monetary easing
and it’s really paying off.
It also looks like they’re going to undertake some fairly strident structural
reform to their economy, which will set them up well.
Today Japan’s growth numbers are the best we’ve seen, on average,
since about 1990. That’s important for Australia because Japan is still
Australia’s second largest export destination after China.
What is the economic outlook for the USA in 2014?
America’s economy is growing at a moderate pace. It’s not back to trend yet,
but clearly we’ve got a sustainable private sector recovery going on in
America.
The key for Australia when you consider America is the likely impact on
our financial markets, because the US has been stimulating their
economy via very loose monetary policy.
They’re in the process now of starting to wind back the extent of that
stimulation and eventually they’ll stop stimulating their economy altogether
and short-term interest rates in America will rise.
Interestingly, the yields on the longer dated US government bonds (for e.g. 10
year bonds) are already rising and that’s in recognition that the end of this
highly stimulatory policy is coming.
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17. That has two implications for Australia:
1) Interest rates - Higher interest rates at the long end of the yield
curve (3, 5, and 10 years in the US) will ultimately translate into higher
rates in Australia, because our bond market is priced at a premium
over the US market. So, if the underlying US assets yield goes up, so
will the yield in Australia.
2) Aussie dollar – As interest rates rise in America it will push up the
US dollar. But a rising US dollar means the Aussie dollar will probably
fall. We think that’s a good reason to expect our currency will be lower
by the end of 2014.
What is the economic outlook for the European Union in
2014?
The truth is that, unless the EU falls over, Australia can pretty much
forget about it.
That might sound a little glib, but unless they have a substantial recession that
might reduce exports from countries such as China, we don’t think the EU will
have much impact on Australia via the trade route.
There was a period there a year or so ago when there was a lot of concern
internationally that because of problems in countries such as Greece, Spain
and Italy, the whole European currency might break up.
But the European Central Bank and the policy makers in Brussels seem to
have now put in place a number of policies which will prevent that from
happening, so the risk of a major financial meltdown has been very much
reduced.
That’s now a very low probability risk for Australia.
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18. What are the opportunities for Australia?
The key opportunities for Australia in the years ahead are clearly going to be
in Asia.
We’ve not only been blessed with an abundance of natural resources,
we’re also in the right time zone, in close proximity with Asia, and also
culturally and politically we’ve seen much more integration between
Australia and the Asia Pacific region than most other developed
economies.
That puts us in the box seat to benefit from the growth in these countries.
I think it’s a really important opportunity for us which might last for a good 20
or 30 years and possibly even longer.
What are the risks for Australia?
The major risks still come from a financial shock and that could
emanate out of America if the Federal Reserve, for example, didn’t do a
good job of moving away from its current very stimulatory settings.
That might cause the market to undergo a major downturn in America and that
would cause problems for financial markets in Australia.
It’s a similar story for Europe, if we saw problems in government debt or
problems with the banking sector, which is quite under-capitalised compared
to other regions.
Fundamentally, however, it looks like most of those risks have been mitigated
to a degree, so I’m not as worried about them as I was a couple of years ago.
The Fed’s recent decision to start tapering its bond purchases was carefully
managed and telegraphed and the announcement did not lead to any
substantial market disruption.
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19. International outlook in 2014 and its implications for
Australia
From an international perspective, the coast looks pretty clear for Australia
going into 2014.
Our outlook is for a quite positive backdrop for Australia because we’ve got
global growth accelerating, particularly among our major trading partners.
It looks like growth in 2014 will be stronger than the long-run average,
which means our exports should do pretty well.
Source: National Australia Bank, ABS
In terms of financial markets, it doesn’t look like there are any major problems
that might blow up. A key risk is the US budget and fiscal positions, but the
recent deal to extend the debt ceiling by two years seems to have mitigated
that risk.
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20. Chapter 3: What do the forecasts mean
for your business?
Comments by James Price
JPAbusiness
There is no doubt the last five to six years has been a tumultuous ride
from an economic perspective.
We’ve seen some highs in activity, particularly in business activity on the
back of growth in mining and commodities, but we’ve also seen sectors
severely affected by contractions in spending, particularly retail.
We’ve also seen new business models emerge via new technology and
online platforms that have changed the game in terms of:
•
•
•
how consumers source products;
how consumers consider their purchasing decisions, and
how businesses can satisfy different markets through a lower cost,
more flexible delivery model.
It’s certainly been a very
challenging time for
businesses of all sizes, but
now we need to ask: where
to from here?
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21. Key messages for small- to medium-sized businesses
Based on our guest contributors’ economic forecasts, there are several key
take-home messages for business owners to consider:
1.
2.
3.
4.
Finance still not open slather
Challenging environment for B2B
Consumer spending opportunities
Positive export outlook
Finance still not open slather
In terms of the costs of funding or the return on surplus funds invested, there
are signs interest rates may have reached a near bottom in their current
cycle.
Coupled with that are good signs the major finance providers have credit
available on reasonable terms and reasonable cost for those companies
that have a really solid track record, strong balance sheets and are able to
meet the basic credit criteria in terms of servicing, security and surety.
There’s no doubt, though, that finance is still not open slather and businesses
with a more leveraged position – those that don’t have unencumbered assets
and a strong servicing record – are still going to find it hard to fund their
ongoing activities.
Challenging environment for B2B
For businesses who provide services to other businesses, it appears there will
be a continuing challenging trading environment in the near term.
There is no doubt there is still a cautious sentiment among the business
community in Australia to confidently invest in growth.
Our guest economists have not forecast strong investment growth, and that
will impact services and products sold to businesses and the degree to which
those markets grow.
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22. That means if you have a business providing services and products to other
businesses, you’ve got to look at your points of difference and be able to
demonstrate those.
You must also look at your value proposition to customers and present
that in a more intriguing way to spike investment interest.
Consumer spending opportunities
There appear to be positive signs in terms of an uptick in domestic
construction of housing – both owner-occupied and investment – and also a
continuing reasonable level of domestic spending.
Of course, those things are heavily impacted by sentiment, but it means
businesses exposed to consumers, rather than other businesses, have the
opportunity to benefit and capture some of that growth.
Positive export outlook
From what our guest contributors are telling us, it appears there is more
chance of downward pressure on the Australian dollar than upward
pressure.
Clearly the outcome of the Australian dollar over the next 12 months is heavily
dependent on international markets, however this is a brighter light on the
horizon for export-exposed businesses, both in agricultural commodities,
mining, wholesale import/export and manufacturers exposed to overseas
markets.
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23. Australia’s changing business landscape
Based on our guest contributors’ comments, it appears we’re moving into a
new Australian business landscape.
While not wanting to be bold and predict that the GFC is gone, we seem to
be over the other side of the hill of the crisis and hyper-volatility that has
accompanied the GFC.
That has the potential to create more confidence in business investment,
business growth and business restructuring.
Over the past five or six years many of our business clients and customers
around Australia have had an ‘all hands on deck’ attitude, and rightly so. In
other words we had to ride the wild seas of the GFC very, very carefully –
almost in a micro-management way – to get through it.
Now there is an opportunity for businesses of all sizes to look forward
and consider:
•
•
•
•
Where are we headed now?
What are our strengths and weaknesses, financially, customer-,
product- and people-wise?
How should we take advantage of the likely economic climate we’re
headed into in the next 1-3 years
Where are the risks we need to protect ourselves against?
It’s a watershed point for a lot of businesses and one where strategic
planning and consideration of future steps need to take place.
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24. 5 key features of the new business landscape
Australia’s new and emerging business landscape is characterised by 5 key
features:
1.
2.
3.
4.
5.
Hyper-competitive economy
Performance oriented
Multi-speed economy
Haves and have-nots
Risk-aware owners
Hyper-competitive economy
This means that in a lot of sectors – retail is a good example – the world is a
smaller place and customers are looking for value.
Whether you’re a power station in Japan looking for the right type of product
or a manufacturer in South Australia looking for a different source of
components, it’s hyper competitive.
People are sourcing products and services and comparing those
globally and there are blurred lines between what used to be very defined
industries.
That means as a business you have to be very clear about the value you
can provide to the market.
It means business is not as easy – it
doesn’t just come to you – but it also
means there are opportunities to
create a point of difference and
therefore do well.
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25. Performance oriented
The business environment is very performance orientated, both in a B2B
supply sense, but also in a customer sense.
If you’re a customer, feedback is now dynamic; it doesn’t rely on a
complaints process.
The ability to tweet, blog and
post your views about an
experience is instantaneous
and can positively or
negatively impact a
business brand even before
the business knows about it.
Multi-speed economy
We used to hear politicians and others talk about two-speed economies.
Based on what our guest contributors have told us, Australia, over the next 12
months and beyond, is going to have many, many speeds.
They are going to be across geographic regions, they’re going to be across
different industries and different sectors.
So the norm is no longer the norm. There is no norm!
As business owners we’re going to have to be more intelligent in terms of our
analysis and review of risks and opportunities, to understand the nuances in
our marketplaces that might allow us to get the upper edge.
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26. Haves and have-nots
There will be the haves and have-nots in business: those that are successful
and those that are not.
That is going to be dependent on the things we’ve just talked about in terms of
being acutely aware of the opportunities in the market and the needs of one’s
customers, and how to deliver that in an intriguing and unique way.
But the other contributing factor is the strength of an individual business’s
underlying capital funding.
From what we’ve heard from the economists, it’s hard to see how an
economy more attuned to financial conservatism is going to suddenly
swing the other way.
So those businesses with decent, secure
capital bases are going to be able to
participate in industry consolidation via
acquisition or inorganic growth.
Those with limited capital funds are going
to struggle.
So, in terms of looking at the future and the
opportunity for strategic planning, this will be a key issue business owners
need to consider:
•
Am I going to be part of the business consolidation and growth phase?
Can I invest in my business? Have I got capacity to do that and to be
competitive in this new environment?
Or
•
Do I need to extract some value by thinking about either a transition
strategy, succession or exit strategy – is that the best avenue for me?
There is no right or wrong answer, but now is the time to be thinking about it.
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27. Risk-aware owners
We appear to be entering calmer economic waters, but the lasting legacy of
the past five or six years’ volatility is business owners that are more risk
aware.
That doesn’t mean business owners won’t be risk takers.
Some of the most successful business people we deal with are very risk
aware and in some respects quite conservative. However people observing
them – both inside and outside their industry – would often say they are
entrepreneurs and risk takers.
The truth is they take very, very calculated risks, an approach which will
be critical for success in the new business landscape.
How to navigate the new business landscape
As we head into this new business landscape, one good approach for a
business owner is to be both ‘Jekyll and Hyde’.
By this I mean being attuned to the new opportunities, because they are
opening up, but also learning from the recent tough times.
So do look for opportunities to invest, grow and develop to strengthen
your business’s value.
But at the same time, having learned from the past five or six years, be
rigorous, disciplined and calculated about the risks and potential
downsides that are still evident in this economic outlook.
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28. Holiday activities!
You’re hopefully having a relaxing January break while reading this. If you do
have a little time on your hands, I suggest you look ahead and make a plan for
your business:
1. Map out a practical plan for
your business for at least the
next 12 months.
2. Talk to your advisor, or even just
jot down some goals that you
feel are achievable, given the
current environment, so that in
January 2015 you can reflect on
them.
3. Have a good look at the value
in assets and liabilities
associated with your business,
get some advice to pressure test
the strength of those, and then
match those with your plans
for the business in terms of
investment, growth, change and
return over the next 12 months.
4. If they don’t match up, identify the gaps and agree strategies to
address them. These strategies could range from succession or exit
to additional funding, changes in funding and finance mix, equity or
partnerships, looking for attractive acquisition opportunities or
additional business lines, looking at ways to diversify your income base,
or consolidating your position by reducing debt.
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